The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

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The terrible price Zimbabweans are paying for government’s extravagance

HON. CROSS: Madam Speaker, I rise to respond to the Address by the President when he opened this Session of Parliament. I want to raise a couple of issues of national importance that I think that this House should consider – the situation in which we find ourselves in today. The situation in Zimbabwe Madam Chair, that I am talking about is the economic and monetary crisis which we face at present. The situation is centred on one central issue which is the issue of the national deficit in the Budget.

If we we study the situation which prevailed between 2009 and 2013 – in 2009 Madam Speaker, our Gross Domestic Product reached about US$4 billion and we collected just short of a billion US dollars in taxes and revenues. The following year, we collected, US$1.7 billion, the year after that US$2.8, the year after that US$3.8 and the year after that we budgeted US$4.3 billion. Madam Speaker, that is a growth in GDP of fourteen times in four years. I think we had the fastest growing economy, not just in Africa but in the world. This is what economists call “a bounce back” because in 2008, we had the economic collapse with the collapse of currency.

The key to our stability during that period was the fact that the Minister of Finance followed a very simple principle. He said, “we eat what we kill”. In other words, each year we run a small Budget surplus. Members of the House might not appreciate the importance of that but rising out of that single central policy, the country had monetary stability. We did not have shortages of cash, we were to import everything we required and we met our bills externally on time. 2013 arrived and immediately, we did two things, there was a collapse of confidence in the market as the banks saw withdrawals of $1 billion, $1.5 billion left the stock market and was externalised and we know that about a billion US dollars fled the country via various other means.

As the consequence of these withdrawals from the market, the income to the State began to decline. However, we did not adjust our expenditure. In 2013 when we had planned for an expenditure of something like $4.2 billion with the income of $4.3 billion, we spent $4.8 billion and the revenues to the State declined. They did not achieve the target of $4.3 billion. In fact, we achieved less than 4 billion. This created a 500 million dollar deficit in 2013 after four years during which we had run a Budget surplus. In 2014 and 2015, we further exacerbated the situation by increasing expenditure in the face of declining revenues. I do not see how the Minister of Finance can claim that the economy of the country is growing, when revenue to the State is declining. Surely, growth in the GDP automatically leads to growth in taxes. In fact, that was not the situation which was happening between 2013 and 2015. In 2016, we simply took all restrictions off expenditure and in 2016 we now know that we spent $1.4bn more than we received in revenue.

When you talk to an economist about the budget deficit, the average fiscal deficit in all SADC states is about 6%. In Zimbabwe, in 2016, our budget deficit was 30%, one-third of our expenditure and income. That is completely unacceptable and unsustainable.

The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.